29 May 2009 | China Economic Scan

29-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese investment rises in Lat-Am, Northeast Electric goes into trading halt following Buffett rumours, Shenzhen Stock Exchange to promote construction of multi-level capital market, SOHO plans $359m bond float, Shanghai stocks are up 45% YTD.

Top 5 headlines

Chinese investment rises in Latin America: ECLAC

• Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) Alicia Barcena said Chinese investment in Latin America is showing substantial increases.
• In the report, ECLAC also cited the deals that the Aluminium Corporation of China reached with Anglo-Australian mining giant Rio Tinto to invest US$19.5 billion in its Peruvian mines, and China Metals agreed with Australia's Oz Minerals to invest US$17 billion in its mines in Latin America.
• Regional foreign direct investment was around US$128.3 billion in 2008, a record figure despite the world's financial crisis. However, the figure is estimated to drop as much as 45% this year, due to the prolonged financial crisis, said the report.

Northeast Electric Halts Trading On Talk Of Buffett Invest

• Shenzhen listed Northeast Electric Development suspended the trading of its shares in both Shenzhen and Hong Kong Wednesday, saying it plans to clarify a local media report on speculation that Warren Buffett may invest in the company.
• Without citing a source, the Shanghai newspaper reported Wednesday that there is talk the U.S. billionaire is negotiating with Northeast Electric's major shareholders over a stake transfer. The paper didn't give other details.
• Its H shares were up 59% at HK$2.26 before trading was halted in Hong Kong at 0250 GMT.

Shenzhen Stock Exchange: To Promote the Construction of the Multi-level Capital Market

• Song Liping said the Shenzhen Stock Exchange shall continue promoting the reform of the systems of IPO and refinancing, enhancing financing efficiency and improving supervision system and means.
• Chen Dongzheng, general-director of Shenzhen Stock Exchange said SME board has made great contribution to the forthcoming launching of the new market and the construction of multi-level capital market.
• Chen stressed that the risks of new market shall be considered and undertaken due to the significance of the new market.

SOHO plans $359m bond float

• SOHO China, the biggest property developer in Beijing's Central Business District, is filling up its war chest for future acquisitions with a $359 million bond issue.
• The Hong Kong-listed developer said the proceeds from the five-year convertible bonds, with a coupon rate of 3.75% a year, would be earmarked for general corporate purposes and strategic acquisitions.
• The bonds will be convertible into 476.2 million ordinary shares, accounting for 8.4% of SOHO's enlarged share capital. The bond will be issued at HK$5.88 each, representing a 20% premium over the stock closing price of HK$4.90 on Tuesday.

Index shows 5th straight monthly gain

• Chinese markets were closed on Thursday (and will be on Fri) for Dragon boat festival after completing a fifth monthly gain, as raw-material producers and shipping companies climbed on higher commodity prices and increased transportation rates.
• "Ample liquidity and optimism about economic recovery have contributed to the monthly rally," said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co. "The gains may not last if we fail to see more good economic and corporate data."
• The Shanghai index has posted gains every month this year for a 45% rally on optimism a 4-trillion-yuan stimulus package and record lending would revive growth.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,885
Shanghai Composite	2,633
Shenzhen Component	10,128
TAIEX	6,890
CNY/USD	6.8310

Source: China Economic Scan

28 May 2009 | China Economic Scan

28-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China urges local governments to spend stimulus money, China organises industry purchasing tours of Taiwan, Bain said to lead KKR in bid for 20% of Gome, China Construction Bank rises after Huijin increases holding, Hong Kong stocks rise over 5% on Wednesday.

Top 5 headlines

Local govts urged to provide stimulus money on time

• China has urged its local governments to cough up funds to ensure major projects in its 4-trillion-yuan ($586 billion) stimulus plan could be completed on time.
• It is estimated that local governments need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan, Zhang Shaochun, vice-minister of finance, told four specialized committees of the National People's Congress yesterday.
• Zhang's statement comes close on the heels of a National Audit Office report, which found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

Chinese mainland organizes industry purchasing tours of Taiwan

• The Chinese mainland has organized schedules for industry purchasing groups to Taiwan from May to September, to help develop the island economy during global financial crisis.
• "The preparations are underway and we plan to convene seven to nine purchasing groups in next five months," said Yang Yi, spokesman of the State Council Taiwan Affairs Office at a press conference Wednesday.
• He said the China Video Industry Association would organize a visit of leading mainland TV producers on June 1 with planned procurement of about US$2.2 billion.

Bain Said to Lead KKR in Bid for 20% of China’s Gome

• Bain Capital may buy as much as 20% of Gome Electrical Appliances Holdings, China’s second-largest electronics retailer, four people familiar with the discussions said.
• Bain may pay about $500 million for the stake, two of the people said, asking not to be identified because the talks are confidential. Bain is competing for Beijing-based Gome with KKR & Co. and Warburg Pincus, the people said.
• Gome’s more than 800 stores in at least 160 Chinese cities make it an attractive target for investors faced with stagnant economies in the U.S., Europe and Japan. KKR and TPG Inc. are among private-equity firms that have sought stakes in companies tied to domestic consumption growth in the past year.

China Construction Bank Rises After Huijin Boosts Stake

• China Construction Bank, the world’s third-largest lender by market value, rose in Hong Kong trading after the company’s largest government shareholder raised its stake and promised to buy more shares.
• The Beijing-based company has acquired about 57.8 million Shanghai-traded shares of Construction Bank over the past six months at a price range between 3.71 yuan and 4.18 yuan a share, according to yesterday’s statement.
• Construction Bank rose +1.9% to HK$4.88 as of 10:22 a.m. in Hong Kong and was up +0.7% to 4.49 yuan in Shanghai.

Hong Kong’s Stocks Surge to Seven-Month High; Li & Fung Rises

• Chinese stocks surged on Wednesday, the Shenzhen Component rose +1.05% to 10,128, the Shanghai Composite jumped +1.71% to 2,633, and the Hang Seng surged +5.26% to 17,885.
• Henderson Land Development Co., a Hong Kong-based developer controlled by billionaire Lee Shau-kee, gained +7.7%.
• Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., jumped +11% after U.S. consumer confidence climbed the most in six years. PetroChina, the nation’s largest oil producer, added +5.8% after oil prices rose.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,885	893.71	5.26%
Shanghai Composite	2,633	44.35	1.71%
Shenzhen Component	10,128	105.62	1.05%
TAIEX	6,890	207.33	3.10%
CNY/USD	6.8310	-0.0025	-0.04%

Source: China Economic Scan

27 May 2009 | China Economic Scan

27-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China allocates 270 bln yuan for infrastructure investment YTD, China hopes for more investment from multinationals, Shandong plans auto behemoth, Xinao gas says sales may more than double in 5 years, Chinese stocks close down on Tuesday.

Top 5 headlines

China allocates 270 bln yuan for infrastructure investment so far in 2009

• China's central government has allocated 270 billion yuan (about US$39.7 billion) for infrastructure investment so far this year, a National Development and Reform Commission (NDRC) official told legislators Tuesday.
• That amount is part of a planned total of 367.6 billion yuan in the 2009 central budget.
• Adding another 30 billion yuan from last year's budget meant that the country had already allocated 300 billion yuan to infrastructure investment since the fourth quarter of last year, NDRC vice director Mu Hong told legislators.

China hopes for more investment from multinationals

• China hopes US-based General Electric (GE) and other multinationals would increase investment, Vice Premier Li Keqiang said Monday.
• "We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment.
• Li said the government was striving to support the development of high-tech and strategic emerging industries.

Shandong plans auto behemoth

• Three auto parts makers, including a leading engine maker and an earthmover manufacturer, will merge to create an industrial conglomerate in Shandong province with sales projected to exceed 100 billion yuan by 2012, the latest industry consolidation move in China's fragmented auto sector.
• Weichai Holdings, Shandong Construction Machinery Group, and Shandong Auto Industrial Group, will form a venture called Shandong Heavy Industry Group Co, according to separate exchange filings by their listed units.
• The combined sales of the three listed companies amounted to more than 40 billion yuan in 2008, according to their annual reports.

Xinao Gas Says Sales May More Than Double in 5 Years

• Xinao Gas Holdings, a distributor of piped natural gas in mainland China, said sales may more than double over the next five years as demand for the cleaner-burning fuel increases.
• Sales will rise by at least 25% each year until 2014, Executive Director Wilson Cheng said in an interview today. Xinao aims to sell 2.8 billion cubic meters of gas this year, compared with 2.2 billion in 2008, the company said on April 8.
• Xinao, based in Hebei province in northern China, forecasts it will connect 750,000 more households to the gas network this year, taking its total number of customers to about 4.5 million.

China shares fall on property tax, liquidity fears

• Chinese stocks fell on Tuesday, the Shenzhen Component fell -1.57% to 10,022, the Shanghai Composite fell -0.82% to 2,610, and the Hang Seng fell -0.76% to 16,992.
• China Vanke, the country's biggest developer, fell -3% to 9.66 yuan, rival Poly Real Estate Group dropped -2.5% to 21.14 yuan and Financial Street Holding lost -3.3% to 10.15 yuan.
• Industrial and Commercial Bank of China, China's biggest commercial lender, edged +0.7% lower to 4.23 yuan while major refiner Sinopec, or China Petroleum & Chemical, fell -1.6% to 10.14 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,992	-130.26	-0.76%
Shanghai Composite	2,589	-21.43	-0.82%
Shenzhen Component	10,022	-159.86	-1.57%
TAIEX	6,683	-51.35	-0.76%
CNY/USD	6.8335	0.0096	0.14%

Source: China Economic Scan

26 May 2009 | China Economic Scan

26-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Chinese rating agency launches sovereign ratings, Dalian futures exchange lists PVC futures contract, Tingyi sees 43% profit rise on noodle and drink sales, Citic Pacific to invest $2.2bln in Steel, Chinese stocks begin the week with a small increase.

Top 5 headlines

China unveils 1st sovereign credit rating standards

• Chinese credit rating agency, Dagong Global Credit Rating, one of the first domestic rating agencies in China, announced the launch of its sovereign credit rating standards.
• Elements of credit risks will include the country's political environment, economic power, fiscal status, foreign debt and liquidity, said the company, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.
• Compared with other rating agencies, Dagong pays more attention to the different economic stage of each country, and examines the features of its credit risks in a holistic and systematic view, according to Dagong.

China launches PVC futures trading

• China started the trading of polyvinyl chloride (PVC) futures contracts at 9 a.m. at DALIAN Commodity Exchange Monday, the 3rd new futures contract this year after steel and rice.
• The September contract V909 opened 275 yuan higher at 6575 yuan per ton.
• PVC is a kind of synthetic resin widely used in construction, plumbing, electric wires and packaging. China is the world's largest PVC manufacturer, with an annual output of 8.82 million tonnes last year.

Tingyi Posts Record Profit on Noodle, Drinks Sales in China

• Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said profit climbed 43% to a quarterly record on higher instant-noodle and beverage consumption in the world’s third-largest economy.
• Q1 net income rose to $93 million, from $65 million a year earlier. Sales increased 21% to $1.18 billion.
• Instant noodle sales gained 12% to $587.7 million in and beverage sales rose 37% to $525 million, Tingyi said. Finance costs fell to $6.63 million from $9.25 million and the prices of palm oil, sugar and plastics declined, it said.

Citic Pacific to Invest $2.2 Billion in Steel, May Sell Assets

• Citic Pacific, rescued by China after posting the biggest currency derivative loss by a Chinese company, plans to invest 15 billion yuan ($2.2 billion) in its iron ore and steel businesses, and may sell other assets.
• The company in March posted its first annual loss of HK$12.7 billion ($1.6 billion) in almost 2 decades. It bought currency contracts to fund the iron ore mine in Australia, and bets that the Australian dollar would gain incurred losses after the currency tumbled.
• Citic Pacific dropped -0.4% to close at HK$16 in Hong Kong trading. The shares have climbed 69% since the appointment of new Chairman, Chang Zhenming on April 8.

China’s Stocks Rise on Economic Recovery Hope; Haitong Gains

• Chinese stocks rose slightly on Monday, the Hang Seng up +0.35% to 17,122, the Shanghai Composite up +0.48% to 2,610, and the Shenzhen Component up +1.09% to 10,182.
• Haitong Securities, the second-largest listed brokerage by market value, rose +6.3% to 14.33 yuan. Pacific Securities added +8.4% to 16.90 yuan and Sinolink Securities gained +4% to 37.53 yuan.
• China may resume these share sales on the nation’s stock exchanges next month, the Shanghai Securities News reported today. 32 companies are waiting to sell a combined 14.3 billion shares in initial offerings, it said.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,122	59.3	0.35%
Shanghai Composite	2,610	12.41	0.48%
Shenzhen Component	10,182	109.53	1.09%
TAIEX	6,734	-2.83	-0.04%
CNY/USD	6.8239	-0.0038	-0.06%

Source: China Economic Scan

25 May 2009 | China Economic Scan

25-May-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: ARC Investment says China's export model is broken, HK regulator says PCCW ruling to stop vote manipulation, Intel Chinese investee eyes Shenzhen GEB listing, China to issue 16.9 bln yuan local bonds and 30 bln yuan t-bonds, CSRC says IPOs to resume after June 5.

Top 5 headlines

China Export Model Is ‘Completely Broken,’ ARC Investment Says

• China’s export model is “completely broken” and investors should shift out of companies that rely on overseas sales and into those that sell goods domestically, according to private equity firm ARC Investment Partners.
• “The export economy model is completely broken,” Adam Roseman, the Shanghai-based chief executive officer at ARC Investment, and “They are working as fast as they can to develop their domestic economy.”
• ARC Investment has invested in 12 Chinese companies focused on the consumer and renewable energy, replacing management in return for taking “large positions” in these companies.

PCCW Ruling to Stop Vote Manipulation, Regulator Says

• The Court of Appeal last month ruled that a PCCW shareholder ballot that approved the HK$15.93 billion ($2.1 billion) buyout was manipulated, upholding a legal challenge from the commission.
• The decision that blocked PCCW Ltd. Chairman Richard Li’s buyout offer for the phone company will stop vote manipulation in privatizations, the city’s markets regulator said.
• The verdict won’t deter “legitimate privatizations,” said Martin Wheatley, chief executive officer of the Securities and Futures Commission.

Intel Chinese Member Eyes Shenzhen Growth Enterprise Board

• Enjoyor Technology Group is preparing for listing on the to-be-established Growth Enterprise Board (GEB) of the Shenzhen Stock Exchange (SSE), said an executive of the Chinese intelligentization solution provider.
• In February 2009, Intel Capital, the investment arm of Intel Corporation (NASDAQ: INTC), announced that it injected a certain amount of money into the Chinese company.
• The company was built in Hangzhou Hi-tech Industry Development Zone (HHTZ), Zhejiang Province in 1992, mainly engaged in building of intelligent traffic, medical, educational, security, financial and office systems.

China to issue 16.9 bln yuan local bonds, 30 bln yuan T-bonds next week

• China's Ministry of Finance (MOF) said Friday it would issue 16.9 billion yuan (US$2.48 billion) of 3-year local government bonds next week on behalf of 4 provinces and municipalities at a fixed annual coupon rate of 1.67%.
• The amounts were 3.5 billion yuan for Guangxi Zhuang Autonomous Region, 5.6 billion yuan for Beijing city, 4 billion yuan for Shanghai city and 3.8 billion yuan for Henan Province.
• The MOF also said it would issue 2 batches of book-entry treasury bonds with a face value of 15 billion yuan (US$2.2 billion) each starting next week.

Regulator: China to resume IPOs after June 5

• The China Securities Regulatory Commission (CSRC) said it would end a de facto suspension of initial public offerings (IPOs) on the Shanghai and Shenzhen stock exchanges as of June 5.
• The CSRC effectively suspended all new stock issues last September, as it halted approvals.
• Under the new rules, stock subscribers need to use either the online or off-line subscription system, but not both, to purchase new stocks. Institutional investors used to enjoy the privilege of subscribing through both systems, while retail investors could use only the off-line system. The new guidelines aim to improve the price discovery function of the stock market, and help retail investors subscribe to newly issued stocks, said the CSRC.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,063
Shanghai Composite	2,598
Shenzhen Component	10,073
TAIEX	6,737
CNY/USD	6.8277

Source: China Economic Scan

China Economic Scan Weekly Stockmarket Review – 23 May 2009

China Economic Scan Weekly Stockmarket Review – 23 May 2009

23/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Mainland stocks closed the week down with the Shenzhen Component down -1.95% week on week to 10,073, and Shanghai Composite down -1.78% to 2,598. Hong Kong stocks however closed up +1.62% with the Hang Seng at 17,063 and in Taiwan the TAIEX jumped +3.82% to 6,737.

During the week Citic Securities Chairman Wang Dongming said China has 300 to 400 companies waiting to do initial public offerings (IPO). China’s securities regulator plans to set up a new system for pricing IPOs and may “soon” end a moratorium on IPOs. Wang also said “The decision on who to list, how to price the listing should be given to the investment bank, company and investors,”

American Dairy reported Q1 sales of $113.8 million vs $39.1 million last year, on increased sales of infant formula. Milk powder sales rose more than threefold in the quarter. “Our first quarter 2009 sales reflect consumers’ flight to quality at the height of the melamine crisis in China,” said Leng You-Bin, chief executive officer of American Dairy.

Esprit, which makes 85% of sales in Europe, said that sales in the 9 months through March fell 2% to HK$27.2 billion ($3.5 billion) as the local currency gained against the euro. Esprit’s wholesale revenue, including earnings from department-store counters, fell 8% to HK$14.8 billion, even as retail sales rose 5.9% to HK$12.2 billion.

PetroChina said it will buy 8 gas suppliers from its parent company and issue 26 billion yuan in medium-term notes. Goldman Sachs Group raised its stock rating to “neutral.”

A Chinese Fund manager, Zhang Ling, at ICBC Credit Suisse Asset Management which oversees the equivalent of $7.21 billion, said “Stocks are expensive now and have reached a level investors deem too high to be pushed up further,” and that “Corporate earnings have yet to catch up.”

Finally, in an exciting development, the China Financial Futures Exchange (CFFEX) is said to be likely to receive approval to launch trading in a Shanghai Shenzhen 300 Index future soon, having conducted mock trading for a little under 3 years.
Trading in the Chinese stock index futures will be limited to investors who have a balance in their margin account of at least 500,000 yuan ($73,313.78); pass a CFFEX test; and have practical experience in the mock trading of stock index futures.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3rd largest economy. For more info visit www.chinaeconomicscan.com

China Economic Scan Weekly Debt Market Review – 23 May 2009

China Economic Scan Weekly Debt Market Review – 23 May 2009

23/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started the week at 117.81 and climbed steadily to a high of 118.08, before closing the week at 118.04. The Shenzhen Corporate Bond Index started the week at 130.59, climbed to a high of 130.78, and closed the week at 130.77

Agricultural Bank of China (ABC) raised 50 billion yuan ($7.3 billion) in the nation’s biggest corporate bond sale to boost capital as part of preparing for an initial public offering (IPO). ABC sold 25 billion yuan of 10-year callable bonds at a coupon rate of 3.3% for the first 5 years and 25 billion yuan of 15-year bonds at 4% for the first 10 years on interbank market.

Shenzhen Development Bank is planning to issue up to RMB 1.5 billion in 15-year bonds on May 26, sources reported. Dagong Global Credit Rating Co has rated the bonds AA-, and Haitong Securities and UBS Securities have been assigned as major underwriters for the issuance.

China's Ministry of Finance (MOF) said it would issue 27.3 billion yuan ($4 billion) of three-year book-entry treasury bonds, the ninth batch of its type this year. The bonds have a fixed annual interest rate of 1.55% and will be sold from May 21 to 25.

The MOF issued a total of 28.5 billion yuan of local government bonds in the first half of May on behalf of 6 local governments, which would include Dalian city, Sichuan province and Hubei province.

Finally, Chinese oil giant, PetroChina said it will buy 8 gas suppliers from its parent company, CNPC, and issue 26 billion yuan in medium-term notes.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3rd largest economy. For more info visit www.chinaeconomicscan.com